United States District Court, W.D. New York
REPORT AND RECOMMENDATION
HUGH B. SCOTT, Magistrate Judge.
Pending before the Court is a motion (Dkt. No. 15) by defendant M & T Bank Corporation ("M & T") to compel pro se plaintiff Lachin Hatemi ("Hatemi") to pursue his claims in arbitration under the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1-16 (Westlaw 2014), and to dismiss this case accordingly. M & T argues that Hatemi entered an agreement when he opened his checking account that included an arbitration provision. According to M & T, the arbitration provision covers any dispute related to the checking account, and Hatemi's claims about overdraft fees relate to the account and services connected with it. In opposing the motion, Hatemi accepts the account agreement and arbitration provision generally but argues that his claims fall outside their scope. Specifically, Hatemi argues that he never consented in writing to overdraft services, that any claimed verbal consent is false and does not follow the appropriate regulations anyway, and that he should not be forced to arbitrate a contract that never existed and that would have been separate from the general account agreement.
The Court held oral argument on May 29, 2014. For the reasons below, the Court respectfully recommends denying M & T's motion.
This case concerns allegations that M & T charged overdraft fees against Hatemi's checking account even though Hatemi never requested overdraft services. Sometime prior to August 19, 2011, Hatemi opened a checking account with M & T. To open the account, Hatemi signed what appears to be a one-page document called an Account Opening Request. (Dkt. No. 15-2 at 2.) The Account Opening Request contains some basic information about Hatemi and the account in question and then states, inter alia, that Hatemi did "acknowledge receipt of, and agree to all provisions of, the General Deposit Account Agreement, Availability Disclosure for Consumer Deposit Accounts, the Specific Features and Terms containing information about the account, the applicable fee schedule and, if the account is a Jumbo Certificate of Deposit, the Agreement for Telephone instructions." ( Id. )
The General Deposit Account Agreement ("Agreement") that Hatemi entered when opening his account contains several provisions that potentially affect the pending motion. Under a heading titled "Governing Documents, " the Agreement states, "The governing documents for your account will be: 1. This agreement; 2. The Specific Features and Terms; 3. Applicable fee schedules; 4. Availability Disclosure for Consumer Deposit Accounts; 5. The Notice Regarding Insufficient Funds, Overdrafts and Order of Payment of Debit Items; and 6. The applicable Consumer Deposit Account Opening Request/Confirmation Form, Consumer Application and Signature Card or similar account opening form." (Dkt. No. 15-2 at 7.) Apart from item number five, which concerns notice, the list of governing documents does not include any documents concerning consent to overdraft services. The next paragraph states, "Other than any agreement between you and us concerning deposits in or withdrawals from your account made in a particular way, the governing documents for your account are the final and complete agreement between you and us concerning your account. Any statement concerning your account made by any of our employees or anyone else is not part of that agreement." ( Id. ; emphasis added.) The only references to overdrafts in the Agreement seem to highlight the absence of overdraft operating documents from the above list of governing documents. When describing payment of debit charges, the Agreement states, "If your account does not contain sufficient available funds to pay the Debit Item, we will, in our sole discretion, decide whether to pay or return the Debit Item (unless you have an Overdraft Arrangement that fully covers the amount by which the Debit Item exceeds your available balance, in which case we will pay the Debit Item)." ( Id. at 11; emphasis added.) Just a little farther down, the Agreement then states, "If we pay any Debit Item that overdraws your account, you must immediately pay us the amount of the overdraft unless the overdraft is fully covered by an Overdraft Arrangement." ( Id. ; emphasis added.) The Agreement repeats similar language just a few lines down and then contains one more paragraph that reads, "If you use an Overdraft Arrangement to cover the amount of a Debit Item posted against insufficient available funds, you must pay all charges relating to use of the Overdraft Arrangement." ( Id. at 12.)
In one section titled "Giving Up of Rights, " the Agreement contains the following language: "None of our rights with respect to you or your account can be given up by us except in a writing signed by us. In the event that any action relating to your account or this Agreement should be maintained in any court, (i.e., any matter other than a dispute covered by the arbitration provisions of this Agreement), we and you each waive any right to a jury trial." ( Id. at 15.) In a section titled "Legal Proceedings, " the Agreement contains the following language: "Before you commence any legal proceeding (including any arbitration proceeding) relating to a Claim, you must first contact us about the Claim and give us an opportunity to resolve it. Similarly before we commence a legal proceeding (including any arbitration proceeding) relating to a Claim, we must attempt to resolve it with you. If any such Claim cannot be resolved within 60 days from the date you or we are notified about it, the Claim may proceed to arbitration or other legal proceeding in accordance with this Agreement." ( Id. at 19.) A section titled "Evidence" states, "In any legal proceeding (including any arbitration proceeding between you and us) involving your account or any governing document for your account, any copy of that governing document kept by us in the regular course of our business is to be admitted in evidence as an original of that governing document." ( Id. )
A critical factor in the Agreement and the pending motion is the Agreement's arbitration provision. The Agreement contains a number of provisions regarding procedure once arbitration begins but contains one principal provision setting up arbitration. Because of its relevance to the pending motion and for the sake of completeness, the Court reproduces that arbitration provision here in its entirety:
Agreement to Binding Arbitration. Each dispute or controversy that arises out of or is related to your account with us, or any service we provide in connection with your account, or any matter relating to your or our rights and obligations provided for in this agreement or any other agreement between you and us relating to your account or a service provided by us in connection with your account, whether based on statute, contract, tort, fraud, misrepresentation or any other legal or equitable theory, including any claim for interest and attorney's fees, where applicable (any "Claim"), must be determined on an individual basis by binding arbitration in accordance with the Federal Arbitration Act ("FAA"-Title 9 of the United States Code) under the auspices of the American Arbitration Association ("AAA"). Judgment on an arbitration award may be entered in any court having jurisdiction. This arbitration provision applies to all Claims regardless of whether such Claims seek monetary, injunctive or declaratory relief or a combination of such types of relief. Any issue regarding the validity or enforceability of the arbitration obligations set forth in this Agreement, and any issue regarding whether a particular dispute or controversy is a Claim that is
subject to arbitration, shall be decided by the arbitrator. ( Id. at 18.)
The only other part of the Agreement that appears to be relevant, though not in dispute, is the provision setting forth that New York law governs the account and any governing document for the account. ( Id. at 19.)
At this point, the record either begins to lose clarity about what happened next or begins to show where the parties' contentions diverge. Of the six governing documents listed at the beginning of the Agreement, only the Agreement itself and the Account Opening Request appear in the record. Hatemi does not appear to dispute that he received all of the governing documents. The parties dispute sharply whether Hatemi responded to any notice regarding overdrafts. Hatemi denies consenting to overdraft services at all. Paragraphs 22 and 23 of the complaint are somewhat ambiguous on this point, perhaps because of pro se draftsmanship, but Hatemi clarified his denial in his opposition papers and at oral argument. While taking a guarded approach to this case out of fear of waiving its rights to arbitration, M & T concedes that no written consent to overdraft services exists. M & T asserts that Hatemi verbally consented to overdraft services and that verbal consent suffices. The parties do agree that, between August 19, 2011 and May 15, 2012, M & T assessed overdraft fees 16 times. Hatemi clarified at oral argument that all 16 transactions in question were either one-time debit transactions or Automated Teller Machine ("ATM") transactions. The exact chronology is not clear, but sometime after the overdraft charges began, Hatemi met with M & T representatives regarding his concern that he never authorized overdraft services and thus the charging of overdraft fees. When Hatemi's initial communications with M & T proved unsatisfactory, Hatemi filed a complaint with the federal Consumer Financial Protection Bureau ("CFPB") approximately in mid-summer 2013. Hatemi has not provided any information about the outcome of any CFPB proceedings that ensued, except to assert that M & T responded to the CFPB around early August 2013.
Hatemi commenced this case by filing his complaint on November 8, 2013. The complaint contains one claim accusing M & T of violating the Electronic Fund Transfer Act ("EFTA"), 15 U.S.C. §§ 1693-1693r (Westlaw 2014). Specifically, Hatemi asserts in his claim that M & T did not obtain written consent for overdraft services and that both the EFTA and associated regulations and commentary require written consent before a customer can "opt in" and receive overdraft services. Hatemi's demands for relief again reflect pro se draftsmanship, but the demands include a demand for declaratory judgment concerning the improper nature of verbal consent; a demand to "order" M & T to eliminate any policies regarding verbal consent, which perhaps could be interpreted as a demand for injunctive relief; a refund of overdraft fees plus costs; and punitive damages. M & T answered the complaint on December 26, 2013. At oral argument, M & T stated that, prior to the commencement of this case, it began the process of changing its policies to require written ...